Navigant Research Blog

Fuel cells have been used to power data centers for years, with players including Apple, eBay, and Equinix all making big investments in the technology. But while most fuel cells power data center facilities from the outside, Microsoft just built a pilot data center with the fuel cells installed right on the racks. This is a shift that could radically simplify future data center infrastructure and improve energy efficiency in these energy-hungry facilities. The big investments noted above notwithstanding, fuel cells have only captured a small fraction of data center market share. New types of deployments like Microsoft’s data center could help drive fuel cells toward the segment’s mainstream.

A Unique Fuel Cell Application

The unique design routes natural gas piping directly to the server racks, which could help eliminate a significant amount of electrical wiring, gear, and controls typical to data centers. A photo from Microsoft’s blog post depicts at least five devices that appear to be fuel cells positioned atop the rack. At an assumed 5 kW-10 kW per rack, the 20 racks likely represent a load of 100 kW-200 kW. The deployment is a good fit for fuel cells since they can be readily scaled in size to match load. That is, a given system can add or remove individual cells or stacks to precisely match demand, a feat not possible with more monolithic alternatives like generator sets (gensets) or microturbines.

There are some potential challenges with this configuration. Installing that much fuel cell support infrastructure (exhaust flue, gas piping, and controls, etc.) could impose significant cost on installations, and maintenance on all those systems could be more taxing than on a single multi-megawatt system installed outdoors. And gas-powered systems generally face the challenge of gas grid outages. Though these are rarer than electric grid outages, they represent a concern—especially in seismic zones like those on the US West Coast. When an outage occurs, many data centers still rely on diesel backup generators since the fuel can be stored onsite. Despite these challenges, this type of deployment shows promise, thanks to ongoing fuel cell technology improvements and the low cost of natural gas.

New Players Enter the Arena

Microsoft mentions project partners McKinstry, a design-build construction firm, and Cummins, an engine and genset manufacturer. Though the fuel cell provider is not noted, Cummins teamed up with UK-based Ceres Power Holdings PLC to develop solid oxide fuel cells for data centers under a Department of Energy (DOE) award in 2016. The award specifies a minimum efficiency of 60% and a capacity of 5 kW scalable to 100 kW. That efficiency is slightly below the 65% (lower heating value) efficiency listed by Bloom Energy, which has largely dominated data center fuel cell deployments to date—though its systems are larger. Regardless of the approach, the high efficiency and consistent energy output of fuel cells is a good match for data centers at large.

While the current design operates on natural gas, a modified future system using pure hydrogen storage could help zero-carbon data centers incorporate intermittent renewable power. That is, the intermittency of renewables like solar PV has historically limited adoption on data center sites, which form a consistent load. If, however, that PV or wind system could generate hydrogen using an electrolyzer in a power-to-gas configuration, the energy could be stored to consistently power the data center via fuel cells. These types of innovations could represent a massive opportunity. According to Yole Développement, data centers used 1.6% of global power production in 2015 and are anticipated to grow to 1.9% in 2020. By any measure, the opportunities in this space loom large.

Hardware

Tesla’s recent innovation in solar PV is the Solar Roof system, a glass solar tile product for homes that has a warranty of the lifetime of the house. The Solar Roof can also integrate with the Tesla Powerwall home battery. The out-of-pocket cost for a typical home in Maryland is estimated at $52,000 (pre-tax credit), but Tesla estimates that the system could earn a modest return of $8,000 over 30 years after, accounting for the tax credit and the value of the energy generated. Customers can choose to finance their Solar Roof through their home mortgage. The Solar Roof is a hardware solution that has the potential to increase the life of residential solar PV installations, improve the value of a home, and be more attractive to customers. However, the Solar Roof rollout appears to be moving slowly, with customer installations about to start and then ramp up through 2017. And as with many hardware innovations, price can be a barrier. Various analysts, including those at GTM, calculated a cost of $6.30/W, which is approximately double traditional solar PV prices today. Additionally, there may be complications for building-integrated PV receiving the federal Investment Tax Credit.

Software

In 2016, Tendril launched a new cloud software product called Orchestrated Energy, a residential continuous demand management solution for utilities that calculates a home’s heating and cooling needs, predicts customer behavior, and integrates connected devices to optimize system operation under a unique dispatch schedule. In pilot programs, the software solution reduced HVAC peak load by up to 50% and energy consumption from cooling by up to 20%. The solution is scalable and device-agnostic, and customers can interact with it via Tendril’s MyHome mobile app. The Orchestrated Energy software solution innovates by providing a seamless, optimized customer home energy management experience. Interestingly, there remains some doubt in the industry as to whether utilities are ready for this advanced software.

Platforms

Current, powered by GE is a startup within GE that offers advanced energy technologies—primarily combining LEDs and solar with networked sensors and software—for commercial and industrial facilities. It offers a single-source platform for energy management across multiple client sites, leveraging GE’s Predix, the cloud platform for all of the company’s Industrial Internet applications. Notably, Current has 125 plus partners providing apps for a variety of enterprise and municipal services (e.g., workspace/productivity management, asset management, and urban mobility/traffic planning) as add-ons to its Intelligent LEDs and the Predix Platform. In August 2017, Current announced a deal to install solar on 50 Home Depots in the United States in partnership with Tesla. Current has also partnered with AT&T to sell Internet-connected sensors to cities as a smart city infrastructure solution. San Diego was the first major city to sign on. The ability to leverage GE’s hardware and software is a strong starting point for the business, but the company has struggled to clearly define a strategy. In December 2016, GTM reported that Current is undergoing restructuring.

In the next installment, we will lay out other solutions related to business models, strategic relationships, market structures, and regulatory models.

After a few conversations with Scott Shepard about PV systems in EVs, I began to come around to his view that solar is too expensive and the roof space too limited to make a solar-equipped EV work at the mass market scale. But then I read about another PV in transport project that made economic sense: Indian Railways’ newly launched solar diesel multiple unit (DEMU) trains. A total of 16 300W solar modules are installed on each coach on the train for ₹9 lakh ($13,950 or $2.9/W). The Indian Institute of Science estimates that the annual energy yield in a solar rail coach will be between 6,820 kWh and 7,452 kWh. This could displace 1,862 liters of diesel, saving around $1,650 per year at $0.88/liter diesel.

Lessons Learned

I see two key elements that make the project work. The first lesson from India is that solar in transport makes more sense when it is displacing liquid fuels rather than electrons. Going back to the Prius example from the first blog in this series, if the solar roof was available in Toyota’s non-plug-in version of the car, its economic effect would be significantly better. If a non-plug-in version of the Prius could run for 2,190 km per year on only solar, it could save about 150 liters per year, which would have a value of around $180 per year (using Japan’s gasoline price in July 2017). The investment in a solar roof could break even within the lifetime of the car, so the current cost of the add-on could be justified.

The second lesson is the use of off-the-shelf modules. In this way, the project benefits from the economies of scale that PV systems are famous for. It would be difficult to use off-the-shelf modules in cars, but if Toyota introduced the solar roof in all its Prius cars (for example), it could increase the production rate of solar roofs for the Prius from a couple of thousand per year to about 350,000 per year (global Prius sales in 2016). Modules with similar high efficiency cells in the wholesale market sell for about $0.50/W (i.e., $90 for the 180W used in the Prius).

Most of the costs arise from integrating the PV cells into the roof of the car. These costs could decline significantly due to economies of scale as well. If Toyota could cut costs to those of the train company ($540 for 180W already installed in the car, including inverters and other costs), the breakeven period would be about 2.5 years. Slashing costs would make a solar roof a no-brainer (especially for consumers like me who would be able to drive the car without ever using a charging point or stopping at a gas station).

Interesting Niche

This would open an interesting niche for solar companies. If all the EV and hybrid EV cars sold globally in 2017 (expected to be between 3 million and 4 million) had a 180W roof, an additional 840 MW (an extra 1%) could be added to global solar PV demand. But solar roofs need a champion to push them into the mass market in the same way Tesla pushed EVs away from the margins. My last blog discussed two startups that are exploring this niche. However, traditional manufacturers could do the same to differentiate their brand and cars from the competition. Toyota is an obvious choice given its brand association with hybrid cars, but other manufacturers could step in. For example, Volvo could be a great candidate since it is hybridizing all its models.

Thanks to improvements in solar costs and the EV value chain, the dream is closer to reality. Two startups (Sono Motors in Munich, Germany and Lightyear in Eindhoven, the Netherlands) have projects underway. Sono Motors successfully crowdfunded more than half a million dollars in September 2016 and revealed its first car on July 27, 2017: the Sion. According to Sono, the Sion will cost between $13,200 and $17,600 depending on the battery size and will run without refueling for around 30 km with a 1 kW solar system. It will be available in 2019.

Lightyear is an unofficial spinoff from Solar Team Eindhoven. This team built the Stella and Stella Lux solar racers—both winners of the Bridgestone World Solar Challenge Cruiser Class. The cruiser class replicates traditional cars, with seating space for four people. Lightyear has been taking preorders since June 29, 2017 for €119,000 ($138,000). The car is expected to offer a range between 400 km and 800 km and travel between 10,000 km and 20,000 km per year in low irradiation areas (e.g., United Kingdom and the Netherlands)—charging only with its PV system.

Today’s Solar-Powered Vehicle Option

A solar-powered vehicle option is available on the market today. Toyota’s latest Prius Prime Plug-in Hybrid offers an option in Japan to add a 180W solar roof that charges the main battery. Toyota claims that the roof will give the car a maximum solar rage of 6 km in Japan, which is a country with medium irradiance levels. The option to add the solar roof costs $2,500, which adds 5%-10% to the vehicle price. This seems expensive given the savings it provides compared to buying electricity from the grid that costs below $70 per year, even with the high electricity prices in Japan. From a convenience point of view, the system might make more sense for people without parking at home and short daily drives. My daily commute is around 4 km, which means that if I had the Prius Prime Plug-in Hybrid with the 180W solar roof add-on, I could drive mostly electric all year without visiting a charging point. It is still an expensive feature, however, which is why most mobility analysts—like my colleague Scott Shepard, who analyzes the EV market—have been skeptical about the idea of putting solar and EVs together. Yet, other automakers are exploring the PV-EV connection, as well. Audi has just announced it will unveil a prototype EV with solar panels on the roof to extend the vehicle range.